PARIS, Aug 14 (Reuters) - European stocks rose in early
trade on Tuesday, reversing the previous session's dip and
resuming their three-week rise as tepid growth figures from
Europe strengthened the case for further stimulus measures from
the region's policymakers.

At 0916 GMT, the FTSEurofirst 300 index of top
European shares was up 0.4 percent at 1,099.45 points, after
losing 0.4 percent in the previous session.

Data showed on Tuesday that gross domestic product (GDP) in
the euro zone shrank by 0.2 percent in the second quarter from
the previous three months, and by 0.4 percent compared with a
year earlier, in line with expectations. Earlier on Tuesday,
data showed Germany had modest economic growth in the second
quarter while France stagnated.

Banking stocks featured among the top gainers, with Banco
Santander up 1.4 percent, UniCredit up 1.2
percent and Natixis up 0.9 percent.

The euro zone bank index, which was up 0.8 percent
on the day, has jumped about 25 percent since European Central
Bank President Mario Draghi said in late July the ECB was "ready
to do whatever it takes to preserve the euro", triggering
expectations of bold measures to help lower the borrowing costs
of debt-stricken Spain and Italy.

"(Banking stocks) have initiated a reversal process, but we
do not have the green lights yet," said Valerie Gastaldy, head
of Paris-based technical analysis firm Day By Day.

"The sector is trying to cross a short-term resistance,
testing the 50 percent retracement of the spring decline. This
signal may be part of a slow medium-term reversal process."

The euro zone's blue chip Euro STOXX 50 index
was up 0.6 percent on Tuesday, at 2,430.43 points, but was
halted for a sixth day in a row by a strong resistance level, a
long-term downward trendline formed by 2011 and 2012 highs.

FLAG PATTERN, LOW VOLUMES

Charts show the index has been forming a 'flag' over the
past week, a technical charting pattern formed by swings within
a narrow range in a mild consolidation trend.

The flag, one of the most reliable 'continuation' patterns,
usually signals a pause in a rally with a drop in trading
volume, before the index resumes its uptrend.

Volumes on the index have sharply dropped over the past two
sessions to levels not seen since the holiday week in late
December.

"Technically speaking, the trend has completely turned
positive. We might get a 5-6 percent consolidation this week or
next, but it won't change the broad picture. Buying the
retracements has been a great strategy lately," said Riccardo
Designori, financial analyst at Brown Editore, in Milan.

Despite the tight ranges for European and U.S. stock indexes
over the past few days, investors' appetite for risky assets
such as equities continued to recover. That was reflected in a 7
percent drop in the CBOE Volatility index, Wall Street's
favorite measure of investor anxiety known as the VIX. It
ended at 13.70 on Monday, its lowest closing level in more than
five years.

The Euro STOXX 50 volatility index, Europe's main
fear gauge known as the VSTOXX, was down 3.5 percent on Tuesday
to a near four-week low of 22.60. It has tumbled about 40
percent since early June.

The lower the volatility indexes, the higher investors'
willingness to invest in risky assets such as stocks.